Insurers launch scheme to improve higher-risk building provision | Fire Protection Association (thefpa.co.uk)

In a bid to help improve the availability of insurance for high-risk residential buildings, the Fire Safety Reinsurance Facility is a joint initiative from the Association of British Insurers (ABI) and insurance broker McGill and Partners and will be launched on 1 April 2024.

Aimed particularly at those buildings that have been identified as having combustible cladding, this facility is expected to be operational for three to five years as the remediation period plays out.

Designed to resolve two issues that have arisen in respect of the insurance of these buildings, namely a lack of capacity for insurers currently writing business and a lack of existing competition in the market, the facilities key aim is to increase the availability of cover. As Mervyn Skeet, ABI Director of General Insurance, explains, this facility is a much-needed piece of a wider picture surrounding buildings in need of fire safety remediation:

“Supporting leaseholders and making insurance more widely available for higher-risk buildings with fire safety issues has been one of the ABI’s top priorities. I’m grateful to McGill and Partners and all the firms involved for their help in establishing this commercial intervention and hope it will encourage more insurers to enter the market and offer cover for these buildings.

“The industry has been determined in its efforts to support leaseholders, but it cannot solve the issue alone. Establishing the Facility is a significant step forward, but Government intervention and swifter remediation is still the only long-term solution. We strongly encourage Government to consider how it can support the Facility to boost confidence in the market or remove Insurance Premium Tax for affected buildings, to offer more immediate relief to leaseholders.”

Those higher-risk buildings already being insured by the five major insurers in this sector – Allianz, Aviva, Axa, RSA, and Zurich – will be entered into the facility at their annual renewal. These are the buildings that are often covered by multiple firms due to the risks being too high for a single insurer to take on alone.

Moving forward, a reinsurance panel being led by Swiss Re through the facility will allow insurers to expand the capacity to insure buildings requiring fire safety remediation and therefore take on new business. This will also allow for insurers to enter additional buildings into the facility over the coming year, and over the course of the next five years, the aim is for this facility to encourage firms to enter into offering this insurance and reinvigorate competition in the market.

Whilst, ultimately, the full remediation of these buildings will resolve this issue, the facility aims to provide leaseholders with the insurance they require, a point taken up by Graeme Trudgill, Chief Executive at the British Insurance Brokers’ Association (Biba), who said of the launch:

“We are delighted with this new facility, which is the culmination of two years of constructive collaboration between BIBA, McGill and Partners, the ABI, expert real-estate brokers and Government. Launching the facility was a key BIBA commitment in our 2024 Manifesto and aims to create a more affordable insurance solution for medium and high-rise residential buildings that have fire safety issues. We hope that in the longer term this will have positive affect on leaseholders.”

Further details and FAQS for the Facility can be found here.